Friday, December 14, 2012

Deficit
Reduction

Deficit
Reduction

The
current negotiations about tax reform and reducing the deficit by
increasing the income tax for the super rich have the air of high
drama. Many observers have the feeling that we are witnessing a
carefully managed theater piece. They are right.

The
United States has been spending a lot more money than it earns.
Spending more than you take in sooner or later leads to bankruptcy
because you owe so much money that you will never be able to pay your
debts. When your creditors see that , they stop lending you money and
you go broke.

The
United States needs to tighten its belt; we need to reduce our
deficit. Current targets are to reduce the deficit by about 2
trillion over the next 10 years.

The
high drama about increasing government taxes on the superrich is
intended to address increasing government income. But it now appears
that this whole theatrical performance has a second purpose, namely
to distract attention from some very obvious ways of increasing
government income.

All
this comes to light in this recent news item: "Google
Inc. (GOOG)
avoided about $2 billion in worldwide income taxes in 2011 by
shifting $9.8 billion in revenues into a Bermuda
shell company.”
(http://www.bloomberg.com/news/2012-12-10/google-revenues-sheltered-in-no-tax-bermuda-soar-to-10-billion.html)

“Under US tax law, foreign profits
are subject to 35% U.S. tax when they are "repatriated,"
or brought into the United States, usually in the form of a dividend.

One
internal document released by the [Congressional Investigative] panel
suggested that HP [Hewlett-Packkard] routinely brought money into the
U.S. without paying U.S. tax. An HP presentation noted that 'without
planning, repatriation of foreign earnings
could lead to tax payments.'

Loans by the foreign units to a
related U.S. entity are considered a dividend for tax purposes but
there is an exception for loans that are repaid within 30 days,
according to the committee's tax experts.

I
spent ten minutes on the Internet and found half of the 2 trillion
the US government needs to say over the next 10 years without
touching the income of the super-rich.

The
tax manipulations by the large corporations are, on the whole, legal.
In order to find half the amount of money needed to reduce the
federal deficit, the US tax code would have to be changed to make it
impossible for large corporations to save $1 trillion over 10 years
in income taxes. Congress would have to take on all the large US
corporations to make them pay their fair share of the cost of the US
government.

Congress
clearly does not have the stomach for that fight because they know
they would lose and it would become clear to everyone that ours is a
government "for, by, and of the large corporations".

Hence
all the fighting about taxing the super-rich-- a theater piece
carefully produced to confuse the citizens about what is really going
on.